[No. 18707.

December 9, 1922]

Po YENG CHEO, plaintiff and appellee, vs. LIM KA YAM,

defendant and appellant.

1. PARTNERSHIP; LIABILITY OF MANAGER TO ACCOUNT;

LIQUIDATION.— Though the manager of a mercantile
partnership which has ceased to do business is accountable to his
associates for any assets of the concern in his hands, judgment
cannot be rendered against him for the proportionate share of the
capital claimed by one of the partners in an action brought by such
partner alone, where the concern has not been liquidated and there
is no proof showing the existence of assets applicable to capital
account.

2. ID.; ID.; ACTION BY SINGLE PARTNER.—Where the only

assets in the hands of the manager of a defunct partnership consists
of shares in other companies, the true value of which is not proved,
it is error, in an action for an accounting brought against him by
one of the partners, to give judgment in favor

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VOL. 44, DECEMBER 9, 1922 173

Po Yeng Cheo vs. Lim Ka Yam

of the plaintiff for a sum of money equivalent to his aliquot part of

the par value of such shares. A single partner cannot recover from
another, without process of liquidation or division, a part of the
undivided property of the partnership.

3. ID.; LIQUIDATION; SURVIVING MEMBER.—When the

manager of a mercantile partnership dies the duty of liquidating it
devolves upon the surviving member, or members, of the firm and
not upon the legal representative of the deceased member.

4. ID.; ID.; CLAIM FOR DAMAGES AGAINST MANAGER.—

When the manager of a mercantile partnership who is charged with
the duty of liquidating the same dies, his associates should take the
proper steps to settle its affairs; and any claim against him, or his
 estate, for damages incident to the misappropriation of its funds by
him or for damage resulting from his wrongful acts as manager, in
excess of his interest in the firm assets, should be prosecuted
against his estate in administration in the manner provided by law.

5. EXECUTORS AND ADMINISTRATORS; PARTNERSHIP;

ACCOUNTING; DlSCONTINUANCE OF ACTION.—When the
manager of a defunct partnership who is named defendant in an
action for an accounting of its affairs and against whom judgment
is sought for mismanagement or misappropriation of its funds dies,
the action should be discontinued, upon motion to that effect by his
personal representative, and the claim for damages should be
presented to the committee on claims in the administration of his
estate. It is error to prosecute such an action to judgment over the
objection of the administrator.

APPEAL from a judgment of the Court of First Instance of Manila.

Imperial, J.
The facts are stated in the opinion of the court.
F. R. Feria and Romualdez Bros. for appellant.
Quintin Llorente and Carlos C. Viana for appellee.

STREET, J.:

By the amended complaint in this action, the present plaintiff, Po

Yeng Cheo, alleged sole owner of a business formerly conducted in
the City of Manila under the style of Kwong Cheong Tay, sought to
obtain an accounting from Lim Ka Yam, as managing partner in said
business and to recover from him its properties and assets. The de-
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174 PHILIPPINE REPORTS ANNOTATED

Po Yeng Cheo vs. Lim Ka Yam

fendant having died during the pendency of the cause in the court
below and the death suggested of record, his administrator, one Lim
Yock Tock, was required to appear and make defense.
In a decision dated July 1, 1921, the Honorable C. A. Imperial,
presiding in the court below, found that the plaintiff was entitled to
an accounting from Lim Ka Yam, the original defendant, as manager
of the business already referred to, and he accordingly required Lim
Yock Tock, as administrator, to present a liquidation of said business
within a stated time. This order bore no substantial fruit, for the
reason that Lim Yock Tock personally knew nothing about the
aforesaid business (which had ceased operation more than ten years
previously) and was apparently unable to find any books or
documents that could shed any real light on its transactions.
However, he did submit to the court a paper written by Lim Ka Yam
in life purporting to give, with vague and uncertain details, a history
of the formation of the Kwong Cheong Tay and some account of its
disruption and cessation from business in 1910. To this narrative was
appended a statement of assets and liabilities, purporting to show
that after the business was liquidated, it was actually debtor to Lim
Ka Yam to the extent of several thousand pesos. Appreciating the
worthlessness of this so-called statement, and all parties apparently
realizing that nothing more was likely to be discovered by further
insisting on an accounting, the court proceeded, on December 27,
1921, to render final judgment in favor of the plaintiff.
The decision made on this occasion takes as its basis the fact
stated by the court in its earlier decision of July 1, 1921, which may
be briefly set forth as follows:
The plaintiff, Po Yeng Cheo, is the sole heir of one Po Gui Yao,
deceased, and as such Po Yeng Cheo inherited the interest left by Po
Gui Yao in a business conducted in Manila under the style of Kwong
Cheong Tay. This business had been in existence in Manila for many
years prior

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Po Yeng Cheo vs. Lim Ka Yam

to 1903, as a mercantile partnership, with a capitalization of

P160,000, engaged in the import and export trade; and after the
death of Po Gui Yao the following seven persons were interested
therein as partners in the amounts set opposite their respective
names, to wit: Po Yeng Cheo, P60,000; Chua Chi Yek, P50,000; Lim
Ka Yam, P10,000; Lee Kom Chuen, P10,000; Ley Wing Kwong,
P10,000; Chan Liong Chao, P10,000; Lee Ho Yuen, P10,000. The
manager of Kwong Cheong Tay, for many years prior to its complete
cessation from business in 1910, was Lim Ka Yam, the original
defendant herein.
Among the properties pertaining to Kwong Cheong Tay and
constituting part of its assets were ten shares of a total par value of
P10,000 in an enterprise conducted under the name of Yut Siong
Chyip Konski and certain shares to the amount of P1,000 in the
Manila Electric Railroad and Light Company, of Manila.
In the year 1910 (exact date unstated) Kwong Cheong Tay ceased
to do business, owing principally to the f act that the plaintiff ceased
at that time to transmit merchandise from Hongkong, where he then
resided. Lim Ka Yam appears at no time to have submitted to the
partners any formal liquidation of the business, though repeated
demands to that effect have been made upon him by the plaintiff.
In view of the facts above stated, the trial judge rendered
judgment in favor of the plaintiff, Po Yeng Cheo, to recover of the
defendant Lim Yock Tock, as administrator of Lim Ka Yam, the sum
of sixty thousand pesos (P60,000), constituting the interest of the
plaintiff in the capital of Kwong Cheong Tay, plus the plaintiff's
proportional interest in shares of the Yut Siong Chyip Konski and
Manila Electric Railroad and Light Company, estimated at P11,000,
together with the costs. From this judgment the defendant appealed.
In beginning our comment on the case, it is to be observed that
this court finds itself strictly circumscribed so far as our power of
review is concerned, to the facts found by

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176 PHILIPPINE REPORTS ANNOTATED

Po Yeng Cheo vs. Lim Ka Yam

the trial judge, for the plaintiff did not appeal from the decision of
the court below in so far as it was unfavorable to him, and the
defendant, as appellant, has not caused a great part of the oral
testimony to be brought up. It results, as stated, that we must accept
the facts as found by the trial judge; and our review must be limited
to the error, or errors, if any, which may be apparent upon the face of
the appealed decision, in relation with the pleadings of record.
Proceeding then to consider the appealed decision in relation
with the facts therein stated and other facts appearing in the orders
and proceedings in the cause, it is quite apparent that the judgment
cannot be sustained. In the first place, it was erroneous in any event
to give judgment in favor of the plaintiff to the extent of his share of
the capital of Kwong Cheong Tay. The managing partner of a
mercantile enterprise is not a debtor to the shareholders for the
capital embarked by them in the business; and he can only be made
liable for the capital when, upon liquidation of the business, there
are found to be assets in his hands applicable to capital account.
That the sum of one hundred and sixty thousand pesos (P160,000)
was embarked in this business many years ago reveals nothing as to
the condition of the capital account at the time the concern ceased to
do business; and even supposing—as the court possibly did—that
the capital was intact in 1908, this would not prove that it was intact
in 1910 when the business ceased to be a going concern; for in that
precise interval of time the capital may have been diminished or
dissipated from causes in no wise chargeable to the negligence or
misfeasance of the manager.
Again, so far as appears from the appealed decision, the only
property pertaining to Kwong Cheong Tay at the time this action
was brought consisted of shares in the two concerns already
mentioned of the total par value of P11,000. Of course, if these
shares had been sold and converted into money, the proceeds, if not
needed to pay
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Po Yeng Cheo vs. Lim Ka Yam

debts, would have been distributable among the various persons in

interest, that is, among the various shareholders, in their respective
proportions. But under the circumstances revealed in this case, it
was erroneous to give judgment in favor of the plaintiff for his
aliquot part of the par value of said shares. It is- elementary that one
partner, suing alone, cannot recover of the managing partner the
value of such partner's individual interest; and a liquidation of the
business is an essential prerequisite. It is true that in Lichauco vs.
Lichauco (33, Phil., 350), this court permitted one partner to recover
of the manager the plaintiff's aliquot part of the proceeds of the
business, then long since closed; but in that case the affairs of the
defunct concern had been actually liquidated by the manager to the
extent that he had apparently converted all its properties into money
and had pocketed the same—which was admitted;—and nothing
remained to be done except to compel him to pay over the money to
the persons in interest. In the present case, the shares referred to—
constituting the only assets of Kwong Cheong Tay—have not been
converted into ready money and doubtless still remain in the name
of Kwong Cheong Tay as owner. Under these circumstances it is
impossible to sustain a judgment in favor of the plaintiff for his
aliquot part of the par value of said shares, which would be
equivalent to allowing one of several coöwners to recover from
another, without process of division, a part of an undivided property.
Another condition will be noted as present in this case which in
our opinion is fatal to the maintenance of the appealed judgment.
This is that, after the death of the original def endant, Lim Ka Yam,
the trial court allowed the action to proceed against Lim Yock Tock,
as his administrator, and entered judgment f or a sum of money
against said administrator as the accounting party,—notwithstanding
the insistence of the attorneys for the latter that the action should be
discontinued in the form in which it was then being prosecuted. The
error of the trial court

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178 PHILIPPINE REPORTS ANNOTATED

Po Yeng Cheo vs. Lim Ka Yam

in so doing can be readily demonstrated from more than one point of

view.
In the first place, it is well settled that when a member of a
mercantile partnership dies, the duty of liquidating its affairs
devolves upon the surviving member, or members, of the firm, not
upon the legal representative of the deceased partner. (Wahl vs.
Donaldson Sim & Co., 5 Phil., 11; Sugo and Shibata vs. Green, 6
Phil., 744.) And the same rule must be equally applicable to a civil
partnership clothed with the form of a commercial association (art.
1670, Civil Code; Lichauco vs. Lichauco, 33 Phil., 350). Upon the
death of Lim Ka Yam it therefore became the duty of his surviving
associates to take the proper steps to settle the affairs of the firm,
and any claim against him, or his estate, for a sum of money due to
the partnership by reason of any misappropriation of its funds by
him, or for damages resulting from his wrongful acts as manager,
should be prosecuted against his estate in administration in the
manner pointed out in sections 686 to 701, inclusive, of the Code of
Civil Procedure. Moreover, when it appears, as here, that the
property pertaining to Kwong Cheong Tay, like the shares in the Yut
Siong Chyip Konski and the Manila Electric Railroad and Light
Company, are in the possession of the deceased partner, the proper
step for the surviving associates to take would be to make
application to the court having charge of the administration to
require the administrator to surrender such property.
But, in the second place, as already indicated, the proceedings in
this cause, considered in the character of an action for an
accounting, were futile; and the court, abandoning entirely the effort
to obtain an accounting, gave judgment against the administrator
upon the supposed liability of his intestate to respond for the
plaintiff's proportionate share of the capital and assets. But of course
the action was not maintainable in this aspect after the death of the
defendant; and the motion to discontinue the

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VOL. 44, DECEMBER 9, 1922 179

Tanedo and Bondoc vs. Judge of First Instance of Tarlac

action as against the administrator should have been granted.

The judgment must be reversed, and the defendant will be
absolved from the complaint; but it will be understood that this order
is without prejudice to any proceeding which may be undertaken by
the proper person or persons in interest to settle the affairs of Kwong
Cheong Tay and in connection therewith to recover from the
administrator of Lim Ka Yam the shares in the two concerns
mentioned above. No special pronouncement will be made as to
costs of either instance. So ordered.

Araullo, C. J., Johnson, Malcolm, Avanceña, and Villamor, JJ.,

concur.
Ostrand, J., concurs in the result.
 Johns, and Romualdez, JJ., took no part in the decision of this
case.

Judgment reversed.

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